Six Changes that Would Improve ObamaCare

July 22, 2013

Now that President Obama has delayed the employer penalty for not providing health insurance until 2015, as well as the requirement that people applying for health insurance on the exchanges provide verification of income, Congress should also postpone the individual mandate and other provisions of the bill, says Diana Furchtgott-Roth, a former chief economist of the U.S. Department of Labor and senior fellow with the Manhattan Institute.

What would make sense would be to delay the entire plan for a year and make the system more flexible and consumer friendly. Here are six proposed changes for lawmakers to consider to improve the Affordable Care Act.

Allow all plans on the exchange. Federal and state exchanges should be allowed to offer multiple health insurance choices, including catastrophic health plans for those who want to pay for routine costs out of pocket and insure only against major medical events.

Raise individual penalties. The tax penalties for not signing up for insurance -- $95 or 1 percent of adjusted gross income (AGI) in 2014, $325 per person or 2 percent of AGI in 2015, and $695 or 2.5 percent of AGI in 2016 and thereafter -- are too low relative to the cost of insurance. People will pay the tax and wait until they get sick to buy the insurance. For the sustainability of the program, the penalties need to rise.

End guaranteed issue. People should get a discount if they sign up when they are young and healthy and keep continuous coverage. Conversely, they should be penalized if they sign up after they are uncovered.

Give all Americans refundable tax credits for health insurance purchase. This amount could be adjusted up or down depending on income.

Allow plans to compete over state lines. A broader choice of health insurance plans would reduce prices by encouraging insurance companies to compete for clients.

State risk pools. In order to enable insurance companies to offer health insurance with low-cost premiums to the general public, those with severe illness could be given the option of special health insurance programs through the state, known as risk pools. The federal government should be prepared to help states set up risk pools if they request such assistance. This would provide more choice for those who really need extra help with difficult to insure conditions.